Under the terms of the Lifetime Learning Tax Credit, you're allowed to claim 20 percent of your total educational expenses for the year up to $10,000. That means the maximum tax credit is $2,000. However, a special provision allows residents of the "Midwestern disaster areas" affected by flooding and tornadoes in 2008 to claim 40 percent of expenses up to $10,000 for a maximum claim of $4,000. Click here for a list of counties included in the Midwestern disaster areas.

You can claim educational expenses paid for any class taken during the past year and the first three months of the current year. For example, if you paid tuition in December 2009 for classes that didn't start until March 2010, you can still claim the expenses on your 2009 taxes.

It's important to keep detailed records of your educational expenses. If you lost your receipts or invoices, ask your school for another copy. Your school is required by law to provide itemized invoices for all educational expenses [source: IRS].

Your school is also required to send you an IRS Form 1098-T by February 2. This is where your school reports all of the expenses that it has received from you along with any scholarships, grants, reimbursements or refunds. (Note: You aren't required to use the figures sent by your school when you report your expenses. You should use the most accurate numbers that your records indicate [source: IRS].)

To claim the Lifetime Learning Tax Credit, you must fill out Part III of the IRS Form 8863 and include it with your regular 1040 income tax return. The form is relatively straightforward, but it does require that you know your MAGI. If you're filing Form 1040A, then your MAGI is the same as your AGI on line 22. If you're filing a Form 1040, then you can calculate your MAGI using worksheet 3-1 [source: IRS].

Keep in mind that not everyone with income below $58,000 receives the full tax credit. If your MAGI is between $48,000 and $58,000 ($96,000 and $116,000 if you file jointly), then you will receive a "phased out" amount. The higher your income, the less you will receive. The phased out amount is calculated in Part V of Form 8863.

IRS Form 8863 is also where you would apply for the American Opportunity Credit. Note that the same individual isn't allowed to apply for both credits, but the same family is [source: IRS]. For example, you can apply for the Lifetime Learning Tax Credit and your dependent son can apply for the American Opportunity Credit.

For more higher education resources, visit the links on the next page.